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Service Level Agreement

What’s the Difference Between a Contract and a Service Agreement?

Contracts are agreements, but not all agreements are contracts. Know what is the difference between a contract and a Service Agreement.

Service agreement and contracts are two essential commercial legal tools for any business. Contracts are agreements, but not all agreements are contracts. This is because an agreement is a step before making a contract. 

A Service agreement is usually an informal agreement between two or more people. They can sometimes be enforced by law. Whereas, when two or more people make a contract, it is a written agreement that can consistently be enforced by law. 

Agreements and Contracts

An agreement is a step before making a contract. When two people make an agreement or sign a contract, they meet their minds. This is an integral part of both. It’s one of the valid reasons to cancel a contract if you and the other person both made the same mistake. This can happen when both parties think they agree on a fact or clause, but one or both of them are wrong.

Both parties should be clear about individual responsibilities. This is true for both an agreement and a contract. Agreements and contracts are both thought of as arrangements between two or more people to do certain things.

Contracts are legally binding promises to do something, but promises aren’t. Some agreements, like clickwrap agreements, are legally enforceable, but those agreements must use certain words to show that the parties want to make a binding agreement.

Formalities of Service Agreements and Contracts

It’s also important to note that the formality of the legal documents makes a service agreement different from a contract. Contracts for service require less formality than service agreements. 

These informal deals sometimes need two people to finish the deal. Contracts, on the other hand, are very formal documents. Contracts give the people who sign their rights and responsibilities, and if they are legal, they can always be used in court. Contracts, especially deeds, must meet certain rules in order to be valid; if they don’t, they won’t work. 

Voidable documents can’t be used in court. Because of this, it is important to think about the formalities of contracts and service agreements at all times.

What is a Service Agreement?

Furthermore, the process of making a contract and a service agreement is very different. A service agreement doesn’t need to be made up from scratch. 

Services agreements can be written with any kind of clause. They were once called “gentlemen’s agreements.” Parties need to know and agree on their rights and responsibilities in order to make a deal. Services agreements can help both parties understand each other better and improve their relationships. 

A list of the rights and responsibilities should be in these agreements. So, it is very simple to make a service agreement.

Contracts Creation

Because contracts have to go through many steps before they can be legally binding, a contract must have a lot of important things to be made.

  • A contract must first have an offer from one of the parties. Whether it’s a million-dollar deal or just painting a fence, an offer can be made at any time
  • As soon as they accept, they will be bound by it. There must be some kind of payment between the offeror and the person who accepts the offer. Consideration often comes in the form of some kind of payment for a good or service 
  • On top of that, there must be a mutual desire from both parties to make sure the contract can be enforced
  • People also need to know the exact terms of the contract and be able to sign it. On the other hand, contracts are different from service agreements because they need to be made in a certain way.

Contracts and Services Agreements: A Match Made in Heaven, as they say

  • So, service agreements and contracts are important to make sure that trade and commerce can go on. Services agreements outline the roles and responsibilities of the people who use them. Services agreements are often less formal and can have a lot of different terms and conditions 
  • On the other hand, contracts tend to be more detailed and require a lot of special rules to follow. Contracts, if made correctly, can be enforced by a court and are a good way to make sure an agreement is made. So, there are big differences between a service agreement and a contract.

Examples: Agreements and Contracts

We have a lot of different contract templates that you can use to make your own. This is a list of some of the most common ones.

1. Non-Disclosure Agreement

There is a type of non-disclosure agreement called an NDA. Even though it is called an agreement, NDAs are often contracts and can be used in court.

2. Employee Offer Letter

Despite the fact that this isn’t called a contract or an agreement, it is, in fact, a contract. An offer letter for a job (because it contains all the elements needed, including consideration, i.e. a salary)

3. Master Services Argument

It’s another one that is a contract even though it’s called an agreement. This one is called a master service agreement. Because it lays out how a business will treat its customers, make an offer, and so on. This will be part of the relationship between the business and its customers.

Which is Better Contract Or a Service Agreement? 

If you want more protection and certainty when it comes to your rights and responsibilities, then a contract is better than a deal. Contracts are legally binding, which means that they can usually be used in court, unlike some other types of agreements that aren’t as legally binding. So, going for a Contract rather than a Service Agreement will be a better option.

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